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International Financial Management

Rehan Ahmad
MCOM FALL 2013

Almost 90% of the financial pages are:
1.)

MARKETS. Eg. Stock market, crude
oil, cotton, foreign exchange etc .
2.) MONETARY POLICY. E.g.. Interest rates,
Inflation, Central banks, S.B.P,etc.
3.) FISCAL POLICY. E.g.. Budget, Government
spending ,Taxes, Deficit, etc.
4.)INTERNATIONAL TRADE & W.T.O. E.g.
Exports, Imports, Asean.

Sequence
1.FISCAL POLICY.

2.MONETARY POLICY.
3.MARKETS :
a.) Currencies. b.) Commodities.
c.) Capital.

4. INTERNATIONAL TRADE.

MACRO

- ECONOMIC POLICY
CONSISTS of MONETARY POLICY and
FISCAL POLICY.
The objective of MACRO - ECONOMIC policy is to
have sustainable GDP GROWTH while containing
INFLATION and achieving an acceptable rate of
UNEMPLOYMENT.

The fact that GDP rises or falls shows that BUSINESS
CYCLES are unavoidable and MACRO-ECONOMIC
policy can never really conquer them.

GDP GROWTH. Country's annual output and
of good & services. Same as economic growth.
UNEMPLOYMENT. The number of people of
working age without a job as a percentage of
the workforce.
INFLATION. Rising prices across the board.
Monetarists ( Milton Friedman) believed it is a
monetary phenomena. To stabilize prices the
rate of growth of money supply needs to be
carefully controlled.

GDP can be calculated by adding the total valueof a
countrys annual OUTPUT of goods & services.

GDP. = C + G

+ I

Consumption
(Consumer) Government

+

(X -M).

Exports

spending
Business
Investment

Imports.


GDP UNEMPLOYMENT
purchasing power INFLATION

‗PHILLIPS CURVE‘. There is a trade off
between INFLATION and
UNEMPLOYMENT.
The lower the UNEMPLOYMENT RATE
the higher is the INFLATION RATE.
Governments have to choose between the
two evils.

Too

much GDP growth will cause an
increased rate of inflation called
overheating in the economy. (e.g.
concern in China in 2006 & 2007)
which can lead to a recession and a...